Regulatory Reform & CRE

In a sweeping executive order issued Jan. 18, President Obama directed every federal agency to conduct a systematic review of existing and new federal rules to ensure “cost-effective, evidenced-based regulations are compatible with economic growth, job creation, and competitiveness.” In a Wall Street Journal op-ed the same day, Obama stated his directive seeks to ‘strike a balance” between common sense rules and “unreasonable burdens on business.” (WSJ, Jan. 18)

The executive order and two presidential memorandums may have a softening effect on forthcoming regulations affecting real estate, including implementation of Dodd-Frank financial services reforms, as well as EPA rules for stormwater and lead paint, which could pose high costs and onerous requirements on owners of commercial properties.

Obama’s “Improving Regulation and Regulatory Review” is seen as a timely olive branch extended to the business community on the eve of his State of the Union address on Jan. 25 and address to the U.S. Chamber of Commerce on Feb. 7. Recognizing that small businesses are the key to create jobs and sustain economic recovery, Obama wrote he is “directing federal agencies to do more to account for – and reduce – the burdens regulations may place on small businesses. Small firms drive growth and create most new jobs in this country. We need to make sure nothing stands in their way.” (WSJ op-ed, Jan.18)

Additionally, the executive order states that federal agencies must adopt regulations “only upon a reasoned determination that its benefits justify its costs,” and “assess available alternatives to direct regulation, including providing economic incentives to encourage the desired behavior ….”

Office of Management and Budget Director Jack Lew noted in a blog on the OMB website that “…it is particularly critical now, as our economy continues to recover and create new jobs, that our regulatory strategy be as evidence-based, predictable, cost-effective, and carefully targeted as possible to enable American businesses to continue to grow and innovate.” (BNA Daily Report for Executives, Jan. 19). Lew said the following guiding principles now apply to agencies when crafting regulation:

• Consistent with law, agencies must consider costs and benefits and choose the least burdensome alternative;

• The regulatory process must encourage public participation and an open exchange of views, with an opportunity for the public to comment;

• Agencies must attempt to coordinate, simplify, and harmonize regulations to reduce costs and promote certainty for businesses and the public;

• Existing regulations must be reviewed to determine that they are still necessary and crafted effectively; if not, they must be modified, streamlined, or repealed.

As the Obama Administration faces a new Republican majority in the House of Representatives, the executive order provides momentum for House committees who plan to investigate and hold hearings to curb excessive regulatory efforts. Obama’s directive will be part of the discussion at next week’s Real Estate Roundtable State of the Industry Meeting in Washington, which will be held in conjunction with its Tax, Capital and Credit, and Sustainability Policy Advisory Committee meetings.